The figures that highlight just how much of an uphill struggle Lovaglio’s Plan B is

There are just a few days to go before the board meetings of Siena and Banco BPM – scheduled for 6 and 5 August respectively to discuss the accounts – and a small army of advisers and legal consultants are working flat out in the Milanese heat to try and finalise the terms of an offer to rival the one put on the table by Intesa Sanpaolo. But the offices are sweltering despite the air conditioning being cranked up to full blast, and the prospect of an extraordinary board meeting as early as this weekend seems optimistic. Convincing the investment funds in particular – which account for around 60 per cent of MPS – that they stand to gain more from a merger between the two banks than from handing their shares over to Intesa is proving to be a complex challenge. As editor Cerasa wrote in yesterday’s edition of "Il Foglio", the market has relegated politics to the sidelines, relinquishing the leading role that characterised part of the first round of the ‘banking Risiko’ game. But when the market has its say, it is the figures that count.

The funds do not think in the same way as the mayor of Siena – who is, quite rightly, taking this line – and the break-up of Monte dei Paschi is seen as an inevitable step towards securing the Intesa bonus. The issue of price, in fact, is now much more pressing than it was last summer, when Mediobanca’s bid for MPS was given the green light by Palazzo Chigi. Luigi Lovaglio, CEO of MPS, has performed well, able to count on the support of the Meloni government; he has regained prominence thanks in part to Minister Giancarlo Giorgetti’s gratitude for having turned the former state-owned bank around. In this new phase, however, he must demonstrate that, without all this backing, he will be able to counter the advance of a major bank such as Intesa Sanpaolo. He must brush aside the views of independent analysts such as Equita, who argue that, compared to the deal proposed by Intesa – which features a clearly defined corporate structure, greater visibility on value and lower execution risks – the MPS-Banco BPM scenario “would remain subject to numerous steps that are still uncertain, ranging from an agreement amongst the major shareholders to regulatory approvals and the finalisation of governance arrangements”. Above all, however, the MPS board must be able to approve a counter-proposal that is attractive enough to shareholders – more so than the public takeover bid launched by the bank led by Carlo Messina, and more so than that bid is currently capable of achieving.

Lovaglio himself, according to financial sources speaking to Il Foglio, whilst convinced that a merger with BPM is the best way to preserve Siena’s integrity, would not go so far as to sign off on an alternative proposal that has no chance of success. The coming days will be decisive. It is true that Intesa’s bid is expected to be launched in November, but Messina has already convened a shareholders’ meeting for early September to secure approval for the capital increase needed to finance the operation in tandem with BPER-Unipol. And the Ministry of Economy and Finance (MEF) is expected to sell its remaining stake in MPS (4.8 per cent) shortly through a public offering, precisely to avoid the awkward choice between accepting Intesa’s offer or retaining the shares – which would amount to a government rejection of the deal. And who will acquire the MEF’s stake is another variable in the equation. But what exactly is Monte BPM lacking to put together an offer that is credible to the market? The scenario currently being worked on involves the distribution of a special dividend to MPS shareholders using the bank’s surplus capital – around 3 billion – to match the cash premium offered by Intesa. But this is just one element of the proposals on the table to finalise a merger between MPS and Banco BPM, which is not viewed as a merger between ‘equals’, given that the former is worth 12–14 billion more on the stock market than the latter – a fact that poses a problem regarding the exchange ratio in any proposed merger.

One option would be to sell the 13 per cent stake held by MPS in Generali to raise the necessary funds, including for the consideration to be offered to the French bank Crédit Agricole, which effectively controls the Milan-based bank. However, at this stage, this would amount to destabilising the insurance company’s structure, something that would not be viewed favourably in Rome either. In short, other pieces of the jigsaw are still missing, whilst the possibility of MPS making a bid for BPM seems to be out of the question, given that it is subject to the passivity rule and that such a move would struggle to be approved by the Siena shareholders’ meeting. Time is running out and the road ahead for Lovaglio looks like an uphill struggle.